Important: remember to revert this once Apple releases a fix, or you'll be in for some new confusing SSH host key issues once your SCM provider actually changes their host key, as your ssh client normally (running as a non-root user) won't be able to modify the system ssh_known_hosts file.

How can we verify which fingerprint type Xcode is looking for for our particular SCM provider? I check with ssh -v user@scm-provider-hostname that the host key presented there: debug1: Server host key: ssh-ed25519 SHA256:… and then checked my ~/.ssh/known_hosts for that host and removed any host key except that one: scm-provider-hostname ssh-ed25519 … Restarted Xcode but it still doesn't work.

Yes, that did the trick, thank you!

@Jeff_H this is with VMWare Fusion 12.1.2 (17964953) but as you can see changing the virtual device to vmxnet3 fixed it.